Capital Planning Glenn Barnes Environmental Finance Center Network
Capital Planning Glenn Barnes Environmental Finance Center Network 919 -962 -2789 glennbarnes@sog. unc. edu
Uh oh! How Do You Pay for This? 10/30/2020 Emergency repair vs. Preventative rehab. / replacement (capital planning) www. efcnetwork. org 2
10/30/2020 Session Objectives • Capital Planning Process • Prioritizing Your Needs • How to Estimate Your Future Costs www. efcnetwork. org
10/30/2020 In the Old Days. . . • Water systems took advantage of the federal government’s ambitious construction grants program of the 1970 s and 1980 s • Everybody loved their “free” money www. efcnetwork. org
10/30/2020 Capital Finance Today • The money never really was “free”—it came from tax dollars • Today, the financial burden has been shifted away from federal and state tax dollars to funds raised by the water system itself. For example. . . www. efcnetwork. org
10/30/2020 EPA Wastewater Spending (1970 -2000) In Billons of Dollars Per Year www. efcnetwork. org
10/30/2020 Capital Finance Today • In other words, you pay (no sense in sugar -coating this) • The harsh reality is that water and wastewater infrastructure is expensive, regardless of the size of your system. Smaller or poorer systems will likely have a hard time paying for capital improvements www. efcnetwork. org
10/30/2020 Infrastructure Gap Source: Steve Allbee, USEPA www. efcnetwork. org
10/30/2020 Aviation D Bridges C Dams D Drinking Water D- Energy D+ Hazardous Waste D Inland Waterways D- Levees D- Public Parks & Recreation CRail C- Roads D- School D Solid Waste C+ Transit D Wastewater D- www. efcnetwork. org 2009 ASCE Grades
10/30/2020 Drinking Water D • America's drinking water systems face an annual shortfall of at least $11 billion to replace aging facilities that are near the end of their useful life and to comply with existing and future federal water regulations. This does not account for growth in the demand for drinking water over the next 20 years. Leaking pipes lose an estimated seven billion gallons of clean drinking water a day (ASCE) www. efcnetwork. org
10/30/2020 Wastewater D • Aging systems discharge billions of gallons of untreated wastewater into U. S. surface waters each year. The Environmental Protection Agency estimates that the nation must invest $390 billion over the next 20 years to update or replace existing systems and build new ones to meet increasing demand (ASCE) www. efcnetwork. org
10/30/2020 Two Related Concepts: Asset Management & Capital Planning www. efcnetwork. org
10/30/2020 http: //www. epa. gov/safewater/smallsystems/pdfs/guide_smallsystems_asset_mgmnt. pdf www. efcnetwork. org
10/30/2020 5 Things to Track for Each Asset in an AM Inventory (EPA) 1. 2. 3. 4. 5. Name/Description/location Age Condition (and service history) Criticality Expected useful life remaining www. efcnetwork. org Source: EPA’s “Asset Management: A Handbook for Small Systems”
Create an Asset Inventory Source: EPA’s “Asset Management: A Handbook for Small Systems” www. efcnetwork. org 10/30/2020
10/30/2020 http: //www. epa. gov/safewater/smallsystems/ pdfs/final_asset_inventory_for_small_systems. pdf www. efcnetwork. org
Some Rules of Thumb – Expected Life • • • Pipelines, valves: 40 -50 years Mechanical equipment: 15 years Wells and springs: 25 -35 years Storage tanks: 30 -60 years Meters: 10 -15 years Concrete will need refurbishing within 30 years www. efcnetwork. org 17 10/30/2020
Create an Asset Inventory Source: EPA’s “Asset Management: A Handbook for Small Systems” www. efcnetwork. org 10/30/2020
10/30/2020 Establishing Asset Condition www. efcnetwork. org
Failure risk/consequence should drive the work program High Risk/Likelihood Schedule for B Rehab/ Replace Immediate Work Aggressive Monitoring Program Sample Monitoring C A Low www. efcnetwork. org D Consequence Source: Steve Allbee, USEPA High 10/30/2020
10/30/2020 Prioritize Asset Rehab. / Replacement Source: EPA’s “Asset Management: A Handbook for Small Systems” www. efcnetwork. org
10/30/2020 Long Term Capital Planning • This is strongly related to asset management • An official multi-year document that identifies and prioritizes capital projects, identifies funding sources, and sets timelines www. efcnetwork. org
10/30/2020 Capital Improvement Program • Identify regulatory deficiencies (discuss with regulatory agencies, look at proposed regulations, talk to consultants), in a 10 -20 year window • Identify growth needs, expansion 23 www. efcnetwork. org
10/30/2020 Capital Improvement Program • Identify deferred maintenance problems or where current service is inadequate • Prioritize based on need realizing that “hidden” infrastructure tends to be ignored 24 www. efcnetwork. org
Capital Improvement Program - Timelines 10/30/2020 • Use Asset Management Plan to plan for capital expenses in the long term (~20 years) 25 www. efcnetwork. org
Capital Improvement Program - Timelines 10/30/2020 • Create a Capital Improvement Plan with a narrower timeline (~5 years) in more detail. Specify the projects and accurate estimates of cost. Plan where money will come from. 26 www. efcnetwork. org
Capital Improvement Program - Timelines 10/30/2020 • Create a Capital Improvement Budget with an even narrower timeline (1 – 2 years) committing funds for the planned capital projects. Get it approved/adopted. 27 www. efcnetwork. org
10/30/2020 Example Capital Improvement Plan (CIP) www. efcnetwork. org 28
10/30/2020 Estimate Required Capital Reserves www. efcnetwork. org Source: EPA’s “Asset Management: A Handbook for Small Systems”
10/30/2020 Where Can You Find the Prices? • Call a vendor. Actually, call a few. • Ask other systems • Look at past expenses but adjust for increases in costs www. efcnetwork. org
10/30/2020 Drive Down the CIP Cost • Is it possible to – Eliminate projects? – Defer projects? – Repair or refurbish instead of replace? – Find a non-asset solution? www. efcnetwork. org
10/30/2020 Last Concept: Life Cycle Costing • Purchase Price ≠ Total Price www. efcnetwork. org
10/30/2020 Capital Investments are Just the Tip of the Iceberg… www. efcnetwork. org Source: Steve Allbee, USEPA
Resource Webpage for Capital Planning 10/30/2020 www. efc. unc. edu/projects/capitalplanning. html www. efcnetwork. org
EFC C. I. P. Tool http: //www. efc. unc. edu/tools. htm#CIPTool Free, simplified CIP tool using only MS Excel (EFC @ UNC) www. efcnetwork. org 10/30/2020
10/30/2020 Software: CAPFinance (EFC @ Boise State) CAPFinance is a user-friendly Program designed for Windows PCs http: //efc. boisestate. edu/efc/Tools/tabid/58/Default. aspx www. efcnetwork. org
10/30/2020 Software: CUPSS (EPA) http: //www. epa. gov/cupss/ www. efcnetwork. org
10/30/2020 What’s Next • How do we pay for all of this? • Before we move on, any questions? ? www. efcnetwork. org
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